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29th Oct 2013
In PS13/2 the FCA published rule changes for Illustrations that extend to the whole range of products where KFIs apply. Based on queries received since that publication, the FCA has set about to make a couple of key clarifications or amendments i.e.
The regulator has long believed that current KFIs are poorly designed, too technical and too long. They have been disappointed that the industry has not taken advantage of the various simplifications they have allowed over the past few years. They are now looking for significant simplification and have researched drafts which are typically half the length of many currently produced by providers.
The FCA has now embedded into COBS specific guidance which says that a firm should:-
CTC has designed a standard illustration that is in line with new FCA guidance.
Most commentators agree that, of all the KFIs, those for Income Drawdown are the most complex - largely because more and more requirements have been added over the years.
CTC has now produced a significantly simplified version - in line with the FCA's new guidance - which also incorporates inflation adjusted projections. This is particularly important for Phased Drawdown cases (for which the non-crystallised funds must be inflation adjusted).
The obvious time to make such changes is with the other April 2014 changes - introducing inflation adjusted illustrations for pensions and changing the maximum projection rates.